Renewable power hits your wallet

Most experts say utility bills will go up, but not by much, if a provision in the House energy bill becomes law.

By Steve Hargreaves, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) -- If a bill that recently passed the House of Representatives becomes law, soon every American would have to pay a little extra for renewable power each month in their utility bill.

The house bill would require most utilities to get 15 percent of their power from renewable resources by 2020.

Anecdotal evidence from one utility says some Americans, about 20 percent, are willing to pay about 8 percent more for this power. Yet when given the option, only about 5 percent of people actually sign up.

So are people in for a big shock if the bill becomes law? The answer varies depending on who's asked.

"We're very concerned about the rate impact our customers are going to see when this mandate hits them in the pocket book," said Stan Wise, a commissioner with the Georgia Public Utilities Commission.

But like most experts in the energy field, he couldn't put a dollar amount on what the House bill might cost consumers if it became law.

Obviously, the cost to consumers will vary depending on the abundance of renewable resources in each region.

Wise, like many commissioners from Southeastern states, opposes a federal renewable requirement on the grounds that it unfairly hits Southeastern states, which he says do not have an abundance of wind resources. Wind is one of the cheapest ways of generating large amounts of renewable power.

But proponents of the bill, who argue its needed to foster investment in renewable power and move the country away from a reliance on fossil fuels, say the Southeast could buy the power from other areas, or simply pay a fee to subsidize renewable power in other regions, thereby "offsetting" their own emissions of carbon dioxide, a leading greenhouse gas.

About half the states currently have a law requiring the purchase of renewable power, and North Carolina's may provide some insight on just how much it's expected to cost. The state recently required its utilities to get 12.5 percent of their power from renewable sources by 2021, a less ambitious plan than the one offered in the House.

North Carolina's law also caps the amount that customers can be charged for the renewable power. In 2008, the cap is $10 per year, increasing to $34 per year by 2015.

On an $80 a month electric bill, the average in the state, that's about a 3.5 percent increase by 2015.

"As a percentage of their bill, it's not a big hit," said Tom Williams, a spokesman for Duke Energy (Charts, Fortune 500), the state's big utility. Still, whether the state can achieve even its modest goal with such a small rate increase is yet to be seen.

Others in the industry think a renewable power law will actually decrease prices in the long run.

Hitting the House's 15 percent by 2020 proposal will require a nationwide investment of $134 billion, according to a recent study by the energy consultants Wood Mackenzie.

But renewable power would take some of the pressure off the demand for natural gas, currently used to generate about 20 percent of the nation's power and eyed as a big source for future generation needs.

The reduced demand for natural gas should lower its price, and Mackenzie estimates the savings could be as much as $240 billion by 2026.

"Over the long run, there is a net benefit to it," said William Durbin, head of global gas and power research at Mackenzie.

In the short run, Durbin said the up front investment to build the renewable power would cost consumers.

He couldn't say how much more people could expect to pay, but said it's likely to be closer to 5 or 10 percent rather than, say, 50 percent.

Others don't agree with the Mackenzie study.

"I think [the bill] would increase the cost," said Michael Allman, president of Sempra Generation, although he said there were too many other variables to predict exactly by how much.

Sempra Generation, a unit of California-based Sempra Energy (Charts, Fortune 500), runs four natural gas power plants in the Southwest.

Allman's argument implies that if natural gas prices really did spike, people would build more renewable capacity without a mandate from the federal government.

"When you constrain something, it has never been good," he said.

The House bill is set to be conferenced this fall with a Senate version, where a renewable energy mandate failed earlier this year. Top of page

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.